The importance of cash flow statements

The cash flow statement is one of the three primary financial statements used by investors to assess a company’s financial health, alongside the income statement and the balance sheet. While income statements focus on profitability and balance sheets provide a snapshot of assets and liabilities, the cash flow statement offers a transparent look into how a company manages its cash—arguably the lifeblood of any business. For investors, understanding the cash flow statement is essential for evaluating the sustainability, efficiency, and overall risk of an investment.